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Managing Risk

In: Business and Management

Submitted By lilixu
Words 1998
Pages 8
managing risks in international strategic alliances
Risks and guidelines to manage them

MANAGING RISK
Emphasise protectionof the firm’s own primary resource
♣Risks are relatively low in protecting physical and financial resources, including patents, contracts, logos, and trademarks (ownership protected by law)
♣Risks are high in protecting technological, managerial, and organizational resources
♣Be careful about unintended transfer of knowledge and imitation; you have little legal protection here

Introduction: We now discuss the ways in which firms with particular resource orientations can manage the two kinds of risks—relational and performance— inherent in strategic alliances. This will involve managing issues such as control, flexibility, security, and productivity
MANAGING RISK
Exercise controlthrough contracts, equity, and management. Employ, as appropriate:

• Managerial control (have one's own staff in key positions, regular meetings, frequent interactions and communications) • Contractual control(specify usage of properties) • Equity control(majority or shared ownership)

Control:
When a partner firm contributes primarily property resources and considers relational risk to be the major risk, its concern is that its properties may be misused and that the other party may reap undue benefits. Although properties are protected through legal ownership—and cannot be taken away without the owner's consent—these can still be employed in unintended ways.

For example, a partner firm's financial and physical resources may be deployed in such a manner that the new venture competes with its own business. In 1993, U S West invested $2.5 billion and obtained a 25.5 percent minority stake in Time Warner Entertainment, a division of Time Warner Inc. The alliance ran into trouble when Time Warner Entertainment proposed several deals with…...

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